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"Similarly I don't care what price point or part of the country you are talking about these days there are flat out not enough buyers for the mountains of inventory that exist. To think that there is any way to quickly lock in profit is to ignore reality."
Chet- glad to hear that you have the ability to know exactly what's happening in every market in the US. Contrary to what you THINK you know, I live in an area of SoCal that has extremely low inventory and a great number of potential buyers. Homes are getting 20-50 offers and typically sell for more than list. Homes that are being flipped are selling like hotcakes due to the frustration of the short sale process. So reign in your arrogance and get a clue. ...just sayin'
Well Natty, my sister-in-law lives in northern San Diego and she tells me that conditions are no longer at "starve to death" levels, but far from anything like she got accustomed to at peak. Her husband makes living appraising commercial properties (and ones a few income producing properties) -- the overbuilding that he sees everyday coupled with the tightened lending standards have snuffed out much activity. About 85% of his business now is simply re-pricing the bad assets that lenders have on their books as they "mark to market".
If you want to preach that there is still money to be made in flipping houses I would strongly suggest that you'll do better hawking a course via email or late night infomercial than trying to buy-fix up- sell...
Well Chet, I make a living helping people buy and sell real estate , but whatever, you're right. There's no market whatsoever in Southwest Riverside County for buying a distressed property at a bargain price, refurbishing and turning at 10-20% profit. I'd write more about how you can't generalize real estate conditions, but I've got to go to another thread and tell some experts in Chicago about what's happening in their local market.
Hey no problem. The OP in this thread and you will do great together -- one lines up the offshore investors, the other has a ready supply of distressed property and presumably buyers eager to buy the place after a 20% profit is tacked on. I'm sure that'll work out real well.
What are the potential problems with flipping houses? I have a client who wants to buy a fixer-upper, fix it and sell, and I want to warn him of possible issues with the transaction. I know about the "90 day rule" and that it can be resolved. Thanks for any advise.
The main potential problem is that well over 50% of flippers lose money (though most won't admit it - or they use the fake "gross numbers" math as seen on TV). Of those who don't lose money, the profits are often very small.
Have your client purchase and read the book Flip. For that matter, you should read it as well. It will sober you up and you'll/they'll know whether they want to try it or not.
The author, Rick, lives here in Austin and has remodeled 2 houses for my buyers. He really knows the business. I've attended his local Flip seminar and learned a lot. It's interesting, if you talk to someone like him who has flipped over 1,000 houses, he's seen a lot. Mostly he's seen a lot of people lose money through incompetence and miscalculation.
Reason #1: Overestimating the After Repair Value.
Reason #2: Underestimating the time required and the costs of the rehab.
It's as predictable as fat people gaining back the weight they lose. Every flipper makes mistakes. Even the very experienced ones. The only question is whether or not they factored those potential mistakes into the original purchase price. Most newbies don't.
If you have to come on a forum to ask flipping advice, you're not the right agent to be advising your buyers. It's an extremely risky activity and certainly not one to be undertaken by an absentee flipper. This has disaster written all over it.
Tell them the truth - that flipping is outside your area of expertise, that you have no personal experience, that you've heard it's very risky, and that if they choose to attempt it, they should find an experienced agent/contractor team that specializes in assessing those opportunities.
Sometimes our job as Realtors is helping people decide not to do what they want.
The main potential problem is that well over 50% of flippers lose money (though most won't admit it - or they use the fake "gross numbers" math as seen on TV). Of those who don't lose money, the profits are often very small.
Have your client purchase and read the book Flip. For that matter, you should read it as well. It will sober you up and you'll/they'll know whether they want to try it or not.
The author, Rick, lives here in Austin and has remodeled 2 houses for my buyers. He really knows the business. I've attended his local Flip seminar and learned a lot. It's interesting, if you talk to someone like him who has flipped over 1,000 houses, he's seen a lot. Mostly he's seen a lot of people lose money through incompetence and miscalculation.
Reason #1: Overestimating the After Repair Value.
Reason #2: Underestimating the time required and the costs of the rehab.
It's as predictable as fat people gaining back the weight they lose. Every flipper makes mistakes. Even the very experienced ones. The only question is whether or not they factored those potential mistakes into the original purchase price. Most newbies don't.
If you have to come on a forum to ask flipping advice, you're not the right agent to be advising your buyers. It's an extremely risky activity and certainly not one to be undertaken by an absentee flipper. This has disaster written all over it.
Tell them the truth - that flipping is outside your area of expertise, that you have no personal experience, that you've heard it's very risky, and that if they choose to attempt it, they should find an experienced agent/contractor team that specializes in assessing those opportunities.
Sometimes our job as Realtors is helping people decide not to do what they want.
Steve
Excellent post.
Additionally, a successful flipper will be well capitalized. So that a mistake will not wipe him out.
Still, that mistake can wipe out the profit from 1 or 2 good projects. Ergo the need for a good war che$t.
I still hear about hard money from time to time. What a recipe for disaster!
Additionally, a successful flipper will be well capitalized. So that a mistake will not wipe him out.
Yes, absolutely.
Plan B is always to rent the property (or move in) and keep for a year or two if necessary. That calculation has to be made up front. If the flipper is unprepared and/or financially unable to do plan B, they shouldn't even consider Plan A.
Austin Steve is dead on. The main problem that people run into in flipping is underestimating time and money involved. Period. There are still a lot of people making a lot of money doing this, but not like it was 4 years ago. I've heard that FHA is getting rid of the seasoning requirement too, which should help. However, I don't deal with FHA loans too much, so I'm not positive on that. It'd make sense though, as it'd help distressed properties get fixed and back on the market sooner. It's easier to absorb nice homes than run down homes.
Austin-Steve - they know I have no experience with flipping, and they are considering other options as well. I really want to help them even if that means no commission for me (as I said, they are my friends). I've asked my broker, local settlement attorneys, and mortgage officers about their experiences too, it's not like we are going to make a descision based on an online forum responses.
Thanks everybody!
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